How Will Near-Retirees Manage Retirement Savings for Retirement

October 2015

Near-retirees typically share the same top financial priorities for retirement—all of which are consistent with annuitization. So is there a disconnect between priorities and intentions among those likely to not annuitize?

Summary

This study examines how near-retirees with significant assets in tax-qualified retirement accounts expect to convert their savings to income in retirement and the factors that influence their expectations. In particular, the researchers focus on what drives annuitization decisions.

Key Insights

Near-retirees likely to annuitize and those unlikely to do so share the same top financial priorities in retirement: protecting a spouse’s financial security, not outliving savings, and covering basic expenses with guaranteed income.

Since the financial priorities of likely non-annuitants are consistent with annuitization, there is a disconnect between this group’s financial priorities and expectations for retirement savings decumulation.

The deciding factors in annuitization decisions seem to be financial advice and experience with annuities while saving for retirement.

Those likely to annuitize are 30 percentage points more likely to have been advised to do so. Those likely to not annuitize are 20 percentage points more likely to have been advised not to do so.

Thirty percent of near-retirees likely to annuitize have retirement savings invested in a deferred annuity, compared with 12% of those likely to not annuitize.

Methodology

The researchers surveyed 501 near-retirees, age 55 or older, who had at least $400,000 in defined contribution accounts and/or IRA assets and no defined benefit pension income. No respondents were retired yet.

Many near-retirees who are unlikely to annuitize report having a limited understanding of annuities and the income level annuitization of their retirement savings would produce.

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